Wednesday, November 25, 2009

November 25 - Market Commentary

The bear in me is still not dead and it surfaces to when I look past the media information and concentrate on what the chart is telling me. Everyone seems to be overwhelmed with massive amounts of data: the fluctuating unemployment rate, retails sales, home sales, mortgage and credit card delinquencies, etc. So far this has all lead to rallies in the market, but where is it going.

I am in the camp that says the bulls are losing steam in the short-run. Looking at the daily chart of the S&P500 below, the technicals point to a local weakness in the bulls. The tops are getting closer together as it becomes harder to push to new levels. Volume, MACD, and RSI indicators are all in downtrends.


As many who have been following my blog know, for some time I have been selling far-out-of-the-money calls to capture the slow down and possible downturn of the market. Looking at the technicals, I think that the time for a halt of rally has come. Will we have a traditional "Santa Clause" rally at the end of the year or will we see profit taking which will slow down or even end the rally.

Friday, November 20, 2009

November 19 - Tricks of the Trade!

Not Doing Anything is Hardest to Do

When it comes to trading there is a common misconception that traders are always buying and selling. This could not be farther from the truth. Two of the main attributes of a successful trader are patience and restraint.

Sometimes we need to sit on our hands and do nothing while the markets reveal their direction. It becomes very easy to get caught in the rapid ups and downs and forget what's really happening. If you feel like you're putting in trades or closing trades simply for the excitement of a new position or closing of a profitable position you may be crossing the line from a calculated trader to gambler. All trades need to be according to plan!

Sometimes your analysis tells you to that a change may be coming or that there may be upcoming underlying complications. In these times all you have to do is WAIT for confirmation which can sometimes be a drawn out process. Many amateur traders will feel the need to trade right away. Hold on and wait while the trend you predicted develops and is confirmed before jumping in for the sake of trading.

These days I find myself putting in smaller trades as I re-assess the state of the markets... Will it go higher? Will there be a major correction? or are we going sideways! The broader markets seem to be flatting out and conflicting data are starting to have their effects on market psychology.